Solid foundations are vital for growth
Phil Rickards is head of sales at BM Solutions
As I sit on yet another early morning train into London I can’t help reflecting on just how much our world has changed and in spite of much more challenging trading conditions, a lot has changed for the better.
I for one certainly don’t miss the late nights and given that a lot of my working days start with an 05 “something” these days, I’m not sure the old body would cope anyway – and for those of you wondering what the 0 in 05 stands for? Oh my god it’s early! I do miss the odd game of golf in warmer climates though I have to admit!
So, it’s with change in mind that my thoughts turn to an eventful couple of weeks since I last wrote for Mortgage Introducer.
I’m sure it’s old news by now but just in case you hadn’t seen it, BM Solutions recently made a few changes to its buy-to-let criteria.
The much talked about and much awaited removal of our minimum income requirement was seen as a very positive move by pretty much all but it was the second change relating to the way we calculate buy-to-let affordability that, disappointingly, provoked a few negative comments.
Now the good news here is that for anyone else in the mid 40’s age bracket that has the same lack of ability or desire to operate such things as twitter, then the negativity would have passed you by. So why am I bringing it up again?
I think it’s important to share the rationale when things change so in an attempt to help those few people who were critical of our affordability change, it’s worth pointing out that the previous generous calculation simply needed a facelift in line with today’s responsible lending environment.
We continually review our policies to ensure that they remain in line with the market and the best interests of our customers and shareholders.
The move to either a notional 5% or product pay rate whichever is the higher helps to build in much needed protection by way of a surplus for landlords.
We believe that this is the right thing to do to ensure borrowers are in the best possible position to be able to manage future payments if their circumstances change, or costs – such as property repairs and maintenance – increase.
The point? Our industry is in recovery mode with the rental market in particular experiencing year on year growth post credit crunch.
This is showing no signs of slowing down.. The latest extensive report into the opinions and attitudes of first time buyers by my colleagues in Halifax show that whilst homeownership is clearly still an important goal for a lot of people, young people remain pessimistic about their chances of getting on the property ladder.
The private rented sector is now at its highest level since the early 1990s and with only a third prepared to save for a deposit for more than three years before abandoning their plans – highlighting the important role of the rental market.
One point that really struck a chord with me was that renters say they never feel properly settled and fear they will struggle to retire.
More needs to be done to redress the balance between the two markets by making homeownership more accessible to people, whilst offering renters more stability.
Making things better for landlords, and ultimately tenants, is always at the core of decisions that we make.
That’s why it can be disappointing to see one or two negative comments at the end of a series of positive criteria moves. Think positively, solid foundations are vital if growth is to be sustained.